26 Sep 2013

Defence contractors benefitting from industry growth

Summary: The world’s aerospace and defence industries have been some of the best performing sectors over the past two years, almost doubling since mid-2011, in spite of major cuts to the sector in both the UK and the US in recent years.

According to Investors Chronicle, defence contractors have weathered the storm of spending cuts better than anyone expected.

According to Pricewaterhouse Coopers, aerospace profits in particular for the current top 100 best-performing companies in the industry were up again this year, growing 6% according to analysis of 2012 annual results. However, there are still questions to be answered surrounding upcoming cuts in the US and around military capability in the UK.

US defense procurement facing further cuts

Over the past year, America spent $682bn (£425bn) on arms in 2012, four times more than second biggest spender, China.  However, the US sequester is still looming, and with the US fiscal year ending at the end of September and no new deal agreed by President Barack Obama and Congress, the Pentagon can expect to lose another $52bn from their budgets.

MOD procurement capability questions

The UK National Defence Association (UKNDA), which campaigns for “fully funded” Armed Forces, recently called Prime Minister David Cameron’s claim that Britain is a major global “no more than a shallow sound-bite”.

Refuting the claims, and chiming with the trends in the world’s defence and aerospace industries outlined above, Defence Secretary Philip Hammond dismissed the claims as “utter nonsense”.

The UKNDA announced a league table which claimed that countries ranging from Israel to Singapore have emerged as more serious military powers than the UK, while France, Spain and Argentina are all ahead of Britain in their defence league table, claims which Mr Hammond has dismissed as a ‘gross slur’ on the UK military.


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